Impacts of the LHA cap on young people in Scotland

12,000 younger Scots face up to £8.6m rent shortfall from LHA cap, new report from the Indigo House Group confirms

A new report by the Indigo House Group shows that around 12,000 mainstream social tenants across Scotland aged under 35 could collectively face an annual rent affordability gap of between £5.3 million and £8.6 million when a UK Government cap on housing benefit (or the housing element of Universal Credit) for social housing tenants at Local Housing Allowance (LHA) rates comes into force in April 2019. This is a key finding of new research commissioned by the Chartered Institute of Housing in Scotland in partnership with the Scottish Government and published today (11th October 2017). The research was conducted by the Indigo House Group.

The cities of Edinburgh and Glasgow are likely to be the most severely affected by the policy with 27% of all of Scotland’s single Housing Benefit claimants aged under 35 living in these two cities, equivalent to more than 6,500 people. The total weekly shortfall in Edinburgh is expected to be £19,600 and in Glasgow, those affected face a collective weekly shortfall of £18,800.

Analysis of average social sector rents shows the potential financial impact for individuals varies considerably depending on the size of home they are living in and how social rents compare with LHA rates for the area. Across Scotland, single tenants under the age of 35 living in a one bedroom home and affected by the cap will face an average shortfall in rent of £6.60 per week. The highest shortfall for one bedroom homes will be experienced in Edinburgh at £22.09 per week. Meanwhile, there are eight areas showing no shortfalls between the average local one bedroom social rents and the ‘cap’ LHA rate.

Since October 2015, the UK Government has made various proposals and amendments to cap Housing Benefit or the housing element of Universal Credit for social housing tenants at LHA rates, including for those living in supported or temporary accommodation. The proposals are intended to bring payments for social housing tenants in line with those living in the private rented sector. Legislation to implement these proposals has yet to be introduced. However, as the proposals currently stand, single people under 35 years of age will see their allowance capped at the Shared Accommodation Rate (SAR).

An upper estimate of the impact of the policy suggests that around 14,400 tenants could face a collective shortfall of £8.6 million annually. These figures were arrived at by calculating the difference between average rents by property size submitted annually to the Scottish Housing Regulator by individual social landlords, comparing this with the SAR in the corresponding local authority area and multiplying this by the estimated total number of social tenants aged under 35 living in that area.

An alternative method using Department for Work and Pensions (DWP) figures was also used. By excluding an estimated 2,500 Housing Benefit claimants aged under 35 who are thought to live in temporary or supported accommodation and may therefore benefit from a partial or total exemption from the proposed LHA cap, the research estimates that the LHA cap would still hit around 12,000 social tenants living in mainstream accommodation with a collective rent shortfall of £5.3 million per year.

Over and above these changes in mainstream housing, there will be massive impacts in temporary and supported accommodation with the total rent gap of £28.6m between current and LHA capped rents. Although it is anticipated that some tenants living in specialist and temporary accommodation will be protected from the cap, it is not yet clear what exemptions will be made or how much funding will be available to plug this gap.